Profile
Previous Close Price
Key Statistics
| Dec RMB mn | 2023 | 2024f | 2025f |
|---|---|---|---|
| PE (X) | |||
| Div Yield (%) | 4.5 | 4.6 | 5.3 |
| P/BV (X) | 1.1x | 1.0x | 0.9x |
Recent Developments
Our Views
Expect well-controlled COR due to improved product mix. Despite high natural catastrophe (NatCat) losses in 1H24, COR has been well controlled at 96.2%, thanks to a) agriculture COR improving by 2.1ppt to 88.9% with the underwriting of more profitable products, b) control of marketing and administration expenses, and c) improvement in COR for personal new energy vehicles (NEVs) to below 100%. We expect PICC P&C to achieve its COR target of 97% for auto and 100% for non-auto in FY24F on a) effective risk prevention measures to reduce the loss ratio in NatCat events (e.g., notifying auto owners to move their vehicles to a safe location before flooding occurs), b) continued improvement of NEV COR with more data accumulated and practice, and c) expected improvement in business mix in non-auto segment, with lower exposure to underwriting losses from the liability and commercial property segments.
Book value growth also supported by investment gains. PICC P&C’s book value is positively correlated to equity market movements, with a 6.8% increase in equity for every 10% increase in the stock market, given its higher investment allocation to equity (24% by end-1H24) compared to Chinese lifers (12%-15%). With a sustained rally in the A-share market, we believe the insurer’s book value is likely to maintain teen-level growth.
Raise TP to HKD14, reiterate BUY. To factor in investment gains from the sustained A-share market re-rating, we have revised up our FY24F/25F earnings by 1%/0.4% and add FY26F forecasts. We have raised TP to HKD14 from HKD12.5, pegged to 1.0x FY25F P/B (previously 0.9x). Based on sustained improvement in underwriting profit and investment performance, we reiterate BUY.
Risks
Research Platform: Insights Direct
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